What Is the State of U.S. Manufacturing?

The manufacturing sector is often cited for creating a thriving middle class in the United States. Through the years, the production of automobiles, transportation equipment, electronics, fabricated metal and other items provided millions of jobs and cemented America’s status as an industrial powerhouse.

But a confluence of factors in the latter half of the 20th century contributed to a decline in U.S. manufacturing—including the economy’s shift from a goods-producing to a service-providing entity, and technological innovations and foreign competition, to name a few.

Still, industry is far from dead in America. Manufacturing has bounced back from the recession of 2007-09 and hiring has picked up, and manufacturers’ biggest challenge at the moment may be attracting the next generation of talent.

Chad Moutray, chief economist of the National Association of Manufacturers (NAM), recently touched on the state of manufacturing in an interview with SHRM Online.

SHRM Online: After years of decline, hiring by manufacturers has rebounded following the recession. Do you expect this to continue?

Moutray: Since the recession, manufacturing in the U.S. has been revitalized, with investment coming here that might have gone elsewhere in past years. Indeed, the sector has benefited from efficiencies in the system, from lower energy costs, and a renewed emphasis on quality and competitiveness. Manufacturers have added 866,000 workers over the past five years, with hiring averaging roughly 15,500 per month since the end of 2013. I expect a similar pace of growth this year and next, with leaders mostly upbeat about future demand and output, despite recent headwinds.

SHRM Online: What is NAM’s position on the proposed Trans-Pacific Partnership free trade agreement? Some concerns have been raised with this proposal, and critics are citing U.S. manufacturing job losses that were associated with the North American Free Trade Agreement (NAFTA). Are those concerns legitimate?

Moutray: Trade represents a tremendous opportunity for growth for manufacturers, and we need to recognize that we compete in a global marketplace. Ninety-five percent of the world’s population lives outside of the United States, and to grow, we need to open new markets for our products. The reality is that the U.S. is relatively open to trade with few barriers, and trade agreements seek to loosen the barriers that we face abroad. NAM supports trade promotion authority, a congressional-executive partnership that makes sure our negotiators have the leverage to conclude the strongest possible agreements and then provide that those agreements have a chance for passage in the Congress on an up-or-down vote.

Trade agreements, such as NAFTA, are often blamed for the loss of jobs, but the reality is that manufacturing has grown significantly over the past decades. Output in the sector has increased from $1.13 trillion in 1993 to $2.08 trillion in 2014, and in the four years after NAFTA was enacted, U.S. manufacturers added nearly 800,000 jobs. Moreover, in 2014, the U.S. had a $21.6 billion trade surplus with its NAFTA partners.

SHRM Online: Much has been made recently of “reshoring” in the manufacturing sector. What do you make of this trend, and if it is occurring, why?

Moutray: Manufacturing in the U.S. has become more competitive than it was even just a few years ago. Productivity gains have helped to make labor costs more competitive, a trend that has been assisted by rapidly rising labor costs abroad, particularly in China. In addition, falling energy prices have also helped to make the U.S. more competitive, especially for industries—such as plastics, chemicals and fertilizers—that utilize natural gas as a feedstock. That has led to a lot of new investments flowing into the U.S., which should help to boost output, employment and exports in the years to come.

Still, while I feel that there has definitely been an increase in investments flowing into the U.S., the notion of “reshoring” has often been over-hyped. There are many possible reasons why a company chooses to locate where they do, and it often hinges as much on where the customers and suppliers are as it does with costs. We hope that we make more in the United States, but we also have to recognize that some investment might not come here because it makes more sense to produce it elsewhere. And, quite frankly, some businesses might be turned away because of our tax and regulatory policies, both of which need to be reformed.

SHRM Online: Recent research from the Society for Human Resource Management has shown that 60 percent of manufacturers have experienced difficulty recruiting during the past 12 months. Some HR professionals attribute this to a lack of skills among applicants. Are you hearing the same concerns from your members, and if so, what is being done to address it?

Moutray: Our surveys suggest the same thing. A recent study from NAM’s Manufacturing Institute and Deloitte found that manufacturers will need to fill 3.5 million manufacturing jobs over the next decade, with 2 million of those jobs likely to go unfilled unless we work to proactively address this shortfall. Much of this will be exacerbated by Baby Boomer retirements.

As a sector, we have worked to try to address this challenge. NAM created the Task Force on Competitiveness and the Workforce that made concrete recommendations on how to ensure a sustainable pipeline of talent moving forward. The association has encouraged manufacturers to work with local educational institutions to provide the needed curricula to address their needs, and it has spearheaded efforts to encourage more women and veterans to pursue manufacturing occupations.

SHRM Online: On a related note, we hear quite a bit about the need for younger workers in manufacturing and related industries. What is being done, or what needs to be done, in order to attract members of younger generations to this field?

Moutray: We need to change perceptions about what a manufacturing job entails, and what it does not. Young people—and their parents—have a perception about “blue-collar work” that is often outdated in today’s modern manufacturing world. The sector offers high-paying, high-tech jobs that continue to be a path to the middle class, and because of technology, workers hired today are often doing jobs that are drastically different than what similar roles might have been even 10 years ago.

NAM is an active partner in the annual Manufacturing Day each October, when manufacturers open their doors for high school students and others in an effort to change perceptions about the sector. Once people see just how much manufacturing has changed in recent years, we hope that they consider making it a career.